The case for SOHU to rally to $150

Sohu (SOHU - $82.50) - Sohu is a leading Internet portal in China (similar to Yahoo). They also have a very popular online games that helped them report huge earnings 2 weeks ago. Revenues surged 156% and earnings exploded by 256% last quarter. They have beat analysts estimates by an increasing % each of the last 4 quarters (I can’t remember ever seeing that). The trend is they have beat estimates by 15%, 19%, 25% & 48% the last 4 quarters. This indicates the analysts still do not have a full understanding of how fast they are growing. SOHU is the official online sponsor of the 2008 Olympics in Beijing. This could become the next BIDU type stock ($90 to $300 in 6 months)…at least that is what is starting to crystallize in my head. What I like is, SOHU is still relatively small with just a $3 billion market cap (for comparison, Baidu is $12 billion). I now think SOHU can get to $5-6 billion market cap pretty easily, especially with them on track to make $3.35 next year (PE is very cheap at just 24x earnings). Put a 45x PE on next years earnings estimate (still way too low in my opinion) and you get $150 stock. For comparison…BIDU sells at 55x 2009 earnings and a whopping 16x revenues so there is reason to believe SOHU can get a much higher valuation. I can visualize Sohu galloping higher day after day as multiple growth funds continue to build a position of hundreds of thousands of shares each.
I like the stock and have made the Decemeber $135 calls a new POWER PLAY.